Sunday, December 16, 2012

Recalling the Marshall Plan

There is a good article on the Marshall Plan in Wikipedia. It points out that the United States provided $26 billion in aid to Europe between the end of World War II and the end of the Marshall Plan. Aid was offered to the European nations involved in the war and Turkey, but was not accepted by the Communist block.

The U.S. GDP was $258 billion in 1948.  Moreover, the United States itself had a need for domestic investment which had been low during the Depression and which had been devoted to military development during the war.
By 1952 as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was at least 35% higher than in 1938.
Of course, the credit for rebuilding the productive capacity of these countries must be given to their own citizens. The U.S. aid to Europe over seven years clearly helped overcome some of the blockages to economic development. Indeed, development economists assumed after World War II that the pace of economic development could be similarly increased in other regions simply by providing financial assistance which would be used to increase capital accumulation and thus productivity. Decades of experience have shown that that is sometimes true, but unfortunately often foreign aid does not lead to economic growth.

Still, it is worth recalling that the United States provided large amounts of financial assistance after the war not only to our allies, but also to Germany, Italy and Japan -- our enemies in the war. It is also worth recalling that those countries became and remain today our allies.

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